Rambaldi's first work in film was creating a fire-breathing dragon for the 1957 Italian picture Sigfrido. In 1963 he became a full-time special effects artist. He worked with Italian directors including Mario Bava, Federico Fellini, Pier Paolo Pasolini, Mario Monicelli and Dario Argento. Some films he worked on included Medusa vs the Son of Hercules, Bloody Pit of Horror, Planet of the Vampires, Hercules and the Princess of Troy, L'Odissea, A Bay of Blood, The Night of the Devils, Andy Warhol's Frankenstein, Andy Warhol's Dracula, Deep Red, King Kong, Close Encounters of the Third Kind, Alien, Nightwing, Possession, E.T. the Extra-Terrestrial, Dune, Conan the Destroyer, Silver Bullet, King Kong Lives and Cameron's Closet, among others. Rambaldi had the distinction of being the first special effects artist to be required to prove that his work on a film was not 'real'. Dog-mutilation scenes in the 1971 filmA Lizard in a Woman's Skin were so convincingly visceral that its director, Lucio Fulci, was prosecuted for offenses relating to animal cruelty. Fulci would have served a two-year prison sentence, had Rambaldi not exhibited the film's array of props to a courtroom, proving that the scene was not filmed using real animals. Rambaldi's last screen credit was on the 1988 horror film Primal Rage, directed by his son Vittorio. When computer-generated special effects became common place, Rambaldi complained, "Any kid with a computer can reproduce the special effects seen in today’s movies. The mystery's gone. The curiosity that viewers once felt when they saw special effects has disappeared. It's as if a magician had revealed all of his tricks... There’s no question that these computer films are well packaged but the charm has disappeared... If Spielberg were to film E.T. today using the latest technology I'm not sure it would be a hit because the techniques they’re using at the moment couldn't reproduce the tender expression of ET's eyes, for example. The secret of creating what technology is unable to express lies in the work of the artisan, who is able to develop characteristics that touch our deepest emotions."
Carlo Rambaldi married Bruna Basso, with whom he had a son, Vittorio, and a daughter, Daniela. Another son, Alessandro, died of a rare form of leukemia at 33 years of age. Rambaldi died after a long illness on August 10, 2012 in Lamezia Terme, Calabria, where he had lived for the last decade of his life, after relocating to be near his daughter and grandchildren. His ashes were laid to rest in the family tomb in Vigarano Mainarda, near his son Alessandro.